26 May

The week ahead – It’s not pretty

The Nigerian military says it will investigate allegations of a plot to overthrow the current democratically-elected government and purported attempts by politicians to influence the office and soldiers of the Nigerian Army. It has vowed that no coup d’etat, or takeover of government, will be supported or encouraged by the armed forces. In a joint press briefing convened by the Defence Headquarters (DHQ) and the Nigerian Army in Abuja on Wednesday, the military asked Nigerians not to nurse any fear or apprehension about the prospects of the military’s incursion in politics. Defence spokesperson, Major General John Enenche, accompanied by his Army counterpart, Brig. Gen. Sani Usman, said the military will remain loyal and subordinate to constituted authority and the Nigerian Constitution. The move to allay concerns comes amid rumours of a possible coup, following fears for the President – Muhammadu Buhari’s health – and his prolonged absences from the country to seek treatment for an undisclosed medical condition.

Acting President Yemi Osinbajo has said that he would assent to the 2017 budget. The Information Minister, Lai Mohammed, had earlier told State House reporters after the Federal Executive Council meeting chaired by Osinbajo on Wednesday, that the decision on who to sign the budget would be taken when the document is transmitted to the Presidency. But Osinbajo, via a Twitter statement by his spokesman Laolu Akande, said the question on who would sign the budget was clear. “Just so we are clear: when the time comes, everything is set and he is satisfied, Acting President Yemi Osinbajo will assent to the 2017 budget,” the statement read. There has been some confusion over who will sign the budget in President Muhammadu Buhari’s absence. Ita Enang, the special adviser to the President Buhari on National Assembly matters, says “Mr President” will sign the budget into law. Enang told Channels Television’s Seun Okin that, “It will be ready tomorrow (Thursday 18 May) all things being equal, and it will be transmitted to the President, all things being equal tomorrow. The budget will be transmitted to Mr President and the President will assent to the budget.”

Nigeria’s indebtedness will climb to 24.1 percent of its GDP by 2018, the IMF has said. In its World Economic and Financial Surveys, the global multilateral lender also projected that by the end of 2017, the country’s current indebtedness would have reached 23.3 percent of GDP, having closed 2016 with a debt to GDP ratio of 18.6 percent. Nigeria’s GDP for the year ended December 31, 2016, stood at ₦67.98 trillion, according to the NBS. Going by the projection of 24.1 percent for 2018, it means that within three years, the nation’s debt to GDP ratio would have gone up by 100 percent. Although Nigeria’s debt to GDP ratio is considered among the lowest in Africa, there are worries about the rising spate of debt accumulation in recent years, while others are more concerned with the quality and utilisation of debts by the nation. The World Bank recently expressed concern over the debt payment to revenue ratio, saying reduced revenue earnings might render the country’s debt unsustainable. A total of ₦1.84 trillion has been allocated in the 2017 budget for debt servicing.

The Kaduna State Internal Revenue Service has threatened to seal all banks operating in the state which failed to pay its communication mast and signage fees as required by law. The KDIRS’ legal adviser, Francis Kozah, told the News Agency of Nigeria in Kaduna on Thursday that the defaulting banks were given two weeks to pay or be sealed. Kozah explained that the Kaduna State Tax Codification and Consolidation Law 2016 provided that all bank branches operating in the state with communication mast and synergy were to pay certain fees. He, however, said that with the exception of the United Bank of Africa Plc, most of the banks have failed to pay, particularly for 2016 and 2017. “We have served them demand notices, Kaduna State Urban Planning and Development Agency equally served them, asking them to come and settle their liabilities but they have failed to do so,” he said.

Suggestions

  • The fear of a military takeover started festering when the Chief of Army Staff, Lt.-Gen. Tukur Buratai, warned his officers and soldiers against hobnobbing with unnamed politicians, whom he alleged were trying to influence unprofessional conduct from the soldiers. A military takeover has been roundly criticised by everyone, including the British government; Pan-Yoruba socio-political group, Afenifere; the Pan-Igbo socio-cultural group, Ohaneze Ndi Igbo; civil society groups; and the ruling All Progressives Congress. The right thing to do in the circumstances, would be to identify these politicians and bring them to justice after the due process has been followed. Looking back at our history, some coups have happened after politicians began making overtures to officers. A strong signal to those who are making attempts to subvert Nigeria’s hard-won, albeit faulty democracy, will ultimately safeguard the democratic process.
  • Away from the fired legal arguments flying through the ether about the appropriateness of the Acting President signing an appropriation bill whose allocation for the legislature was significantly increased by the same legislature, the fact that the executive sent mixed messages on a fundamental aspect of getting the country on a path to judicious spending is a miniature commentary on the state of Nigerian governance. The most important things to glean from this development are that Osinbajo is well within his legal rights to consider and sign any amended bill sent back to him from the legislature, and any business, civic or social leader with any cursory or pecuniary interest in the country should be prepared to stomach an uncomfortable amount of political uncertainty as part of her palate.
  • Borrowing for every government is a norm. In fact, for any nation’s capital markets to be robust, its government’s borrowing programme must be massive. The United States’ current debt is estimated at over $19.92 trillion or 107.2% debt of GDP ratio, compared to Nigeria’s meagre debt to GDP ratio of 18.6%. However, beneath this figure lies the problem. The United States’ 10-year treasury yield stands at 2.33% whereas Nigerian 10-year FGN bond yields, stand at 16.24%. This means the Nigerian government’s cost of borrowing is about x7 that of the United States, hence the allocation of ₦1.84 trillion or 25% of the budget to debt service. This is not sustainable for any nation or business entity. SBM Intel therefore reiterates its advice that Nigeria should take drastic measures around the mix of capital to recurrent expenditure, to reduce budget deficits, while doing the hard work of increasing tax coverage from the current paltry 6%, to a minimum of 15% as proposed by the ERGP.
  • In our 2017 outlook, we had counselled that government at all levels would be more aggressive in their tax drive this year as revenues from FAAC continue to be low. Hence the move by the Kaduna State government is expected and necessary. We urge the organizations to either pay the taxes or lodge valid complaints to government where those exist. We however urge the government to also ensure that these laws do not represent a double taxation on the same items.